According to the U.S. nonfarm payrolls report on Friday, job growth in the world’s largest economy rose less than expected in August, which could dim prospects of a Federal Reserve interest rate hike later this month, even as the unemployment rate dropped to a near 7-1/2- year low of 5.1 percent and wages accelerated.
Nonfarm payrolls increased 173,000 last month as the manufacturing sector lost the most jobs since July 2013, after an upwardly revised 245,000 rise in July, the Labor Department said on Friday. It was the smallest gain in employment in five months.
The report, however, may have been tarnished by a statistical fluke that in recent years has frequently led to sharp upward revisions to payroll figures for August after initial weak readings.
Forecasts were for nonfarm payrolls increasing by 220,000 last month, but economists warned that the model the government uses to smooth the data for seasonal fluctuations might not adequately account for the start of a new school year.
Indicating that the slowdown in job growth was likely not reflective of the economy’s true health, payrolls data for June and July were revised to show 44,000 more jobs created than previously reported. In addition, average hourly earnings increased 8 cents and the workweek rose to 34.6 hours.
While the report may not change views that the U.S. economy remains vibrant amid volatile global financial markets and slowing Chinese growth, it could make Fed officials hesitant to push borrowing costs higher at a policy meeting on September 16 to 17.